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The USD/JPY pair rose during the session on Tuesday as the market continues to press him on the 79 handle. We think that a break above the 79 handle would lead us to the 80 handle relatively short order, but does the short-term traders that. The pair has a ton of selling pressure on top of it, and as such this market could be a great range bound trading opportunity for some time to come.
This is mainly because of the Bank of Japan being underneath the market. It's obvious that the 78 handle gives the Bank of Japan concern, and as long as that is the case we think that there is a very possible tight range between roughly 78 and 80 that should contain this market for the foreseeable future. With this in mind, you can simply sell towards the top of the range, and by towards the bottom. We think that any break down to the downside will get intervened against by the Bank of Japan, and as such this almost acts as a bit of a "put" against losses.
If we can get above the 80 handle, this market could go much higher. The first area it will run into trouble is the 80.60 level, but after that we see a clear path to 84. If that's the case, this market could end up becoming a nice long-term buy-and-hold proposition. If we managed to clear the 80.60 level after a move higher, reentry into this market shouldn't be a concern, as we really could be seeing the beginning of a trend change at that point.
Of course, the one big problem is that the Federal Reserve continues to devalue the US dollar. If it weren't for that, this market would probably be a couple hundred pips higher at the least. As a matter fact, it makes no sense to own the Japanese yen when you look at the Japanese economy. However, it is considered safe currency, and as such before willing to buy it when they are concerned about financial conditions.